The solution to the problem of 'good harvest, low price' of Vietnamese agricultural products

The development of commodity trading through the Department is helping Vietnam's agricultural sector gradually escape the vicious cycle of "good harvest, low price". Thanks to the connection with international exchanges and the application of futures contracts, farmers and businesses have more tools to prevent risks, stabilize output and improve competitiveness in the global market.

Enterprises purchasing durian that meets export standards to China. Illustrative photo: Anh Dung/VNA

The solution to the problem of good harvest but low price

Recently, the price of durian in many localities has suddenly plummeted, causing durian growers to suffer. While two years ago, the price of Ri6 durian reached 170,000 VND/kg, now the price of durian is only 35,000 - 40,000 VND/kg. At this price, people are suffering heavy losses.

According to traders, the main reason for this situation is dependence on the Chinese market, or more directly on Chinese traders. This country is currently tightening trade, making it difficult to export durian. In addition, in the past few years, durian prices have increased sharply, so people have also increased their planting areas, leading to a situation of good harvests and low prices.

Obviously, over-reliance on the free market and lack of tools to hedge price risks make farmers and businesses vulnerable to being passive when supply exceeds demand or when exports encounter problems.

The situation of good harvest and low price of durian seems to have been a vicious cycle for Vietnam’s agricultural production industry for many years. From coffee, watermelon, longan, lychee… all fall into this cycle.

Up to now, the agricultural product that is considered to have temporarily escaped this vicious circle is coffee.

Since the severe crisis period of 2008-2016, when many gardeners destroyed their coffee trees to convert to other crops, the current coffee growing area is being maintained, coffee output is growing steadily, and transaction prices are high.

The latest report from the US Department of Agriculture (USDA) said that in the 2023-2024 crop year, Vietnam's coffee output will reach 27.5 million bags (equivalent to about 1.65 million tons), in the 2024-2025 crop year it is expected to reach 29 million bags (equivalent to about 1.74 million tons) and in the upcoming 2025-2026 crop year it is expected to reach 31 million bags (equivalent to about 1.86 million tons). Meanwhile, coffee prices have increased rapidly from the range of 50,000 - 60,000 VND/kg in early 2023 to the range of 130,000 VND/kg in 2025 and are expected to stay at this level in 2026.

According to Do Xuan Hien, Chief of Office of the Vietnam Coffee Association, these results are largely due to the trading of goods through the Exchange. When the Exchange is directly connected to international exchanges such as ICE and CME, Vietnamese businesses can access global standard coffee prices in real time, improving transparency and pricing capabilities in business.

Typically, in mid-February 2025, when world coffee prices peaked (Arabica was over 9,000 USD/ton, Robusta was also approaching 6,000 USD/ton), domestic coffee was also at its highest level ever at 133,000 VND/kg.

More importantly, participating in futures trading helps businesses proactively hedge price risks, stabilize revenue and profits by "locking in" selling prices in advance, instead of depending on market fluctuations. This is also a strategic step to help improve financial management capacity and gradually integrate deeper into the global value chain.

The advantage of trading goods through the Exchange is not only shown for coffee products, according to Dr. Nguyen Minh Phong of Economics, trading goods through the Exchange not only helps to diversify and find effective channels for goods consumption, but also contributes to information transparency and supports the balance of market supply and demand, creating a fair competitive environment in accordance with market principles and in line with the spirit of Resolution 68 recently issued by the Politburo . Moreover, because prices are publicly established based on supply and demand and use market tools such as forward contracts, futures contracts or international standard clearing mechanisms to regulate the economy, the economy is not subject to administrative intervention, helping businesses - especially the private sector - proactively hedge risks and optimize production and business efficiency.

Market creation role

Coffee harvest of Vuong Thanh Cong Production and Trading Company Limited in Buon Ma Thuot city, Dak Lak province. Illustration photo: Vu Sinh/VNA

Dr. Nguyen Minh Phong also said that the development of commodity trading through the Department also contributes to the formation of a modern financial investment channel thanks to the synchronous development of various types of markets and the completion of healthy and transparent competitive institutions between market participants; reducing dependence on intermediaries and price manipulation; contributing to concretizing and realizing the Party's major orientations on private economic development: taking the private economy as the most important driving force in economic growth, innovation, enhancing competitiveness and job creation, ensuring social security in the socialist-oriented market economy in our country in the coming time.

Up to now, MXV is the only unit in Vietnam licensed to trade commodities, and has built a solid market foundation over the years. Currently, MXV is organizing transactions of 46 commodities and connecting with 10 major commodity exchanges in the world such as CME, ICE, SGX...

According to MXV data, the Exchange currently has 30 member companies and brokers, with an average transaction value of VND 5,000 - 7,000 billion/day, even reaching VND 11,000 billion in one session, growing by 10% in 2024 compared to 2023. This has shown the strong potential of this market.

According to Mr. Nguyen Ngoc Quynh, Deputy General Director of MXV, aiming towards a modern, international commodity trading market, over the years, MXV has made efforts to build an effective management and trading system, approaching international standards and receiving high appreciation from foreign partners. Typically, the M-System trading technology system developed by MXV itself is capable of processing large volumes of transactions, safely, quickly, effectively serving thousands of investors every day.

Along with that, the development of commodity trading through the Department also receives attention, direction and close management from the Government and relevant agencies.

The Ministry of Industry and Trade - as the governing body - has demonstrated a strategic vision in creating a legal corridor for the Vietnamese commodity trading market, when the Ministry has proactively built a new policy system, aiming to be compatible with international standards, creating a solid foundation for sustainable development of commodity trading activities. Typically, in the direction of developing the Draft Decree to replace Decree No. 158/2006/ND-CP and Decree No. 51/2018/ND-CP, the Ministry of Industry and Trade has demonstrated a breakthrough mindset with three important reform pillars: First, optimizing the conditions and procedures for market entry, ensuring that only organizations with sufficient capacity and reputation are allowed to participate in operations. Second, comprehensively completing the legal framework regulating the activities of entities - from businesses to individuals - to improve the quality and efficiency of transactions. Third, build a modern state management mechanism with the ability to closely monitor, strictly enforce laws and promptly handle violations, creating a transparent and fair business environment.

In addition, the Ministry of Finance has made key contributions to creating a favorable environment for the development of the commodity trading market through superior tax management policies, such as the VAT policy that is consistent with Vietnamese practice and international practices for commodity trading activities through the Exchange, helping to reduce transaction costs and increase market competitiveness. In addition, to ensure transparency in financial reporting and risk management for financial products, the Ministry of Finance also plans to closely coordinate with the Ministry of Industry and Trade to develop a system of regulations on specialized accounting regimes for commodity trading activities to complete the legal framework for commodity derivatives trading - an important tool to help businesses hedge against price risks. The development of separate accounting standards for commodity derivatives products not only enhances professionalism but also creates trust for international investors.

The State Bank of Vietnam (SBV) has demonstrated its initiative and vision in building a modern payment infrastructure, creating a solid foundation for commodity trading activities. In particular, the SBV has issued regulations on payment and money transfer specifically for commodity trading in Circular 20/2022/TT-NHNN guiding one-way money transfer from Vietnam to foreign countries and payment and money transfer for other current transactions, significantly improving the efficiency of commodity trading activities. At the same time, the SBV has established a strict monitoring mechanism for payments and money transfers of the Commodity Exchange. This strict regulation has created a "firewall" that not only enhances the safety and solid protection of the commodity trading market but also ensures the security of the financial payment system.

According to VNA

Source: https://baoapbac.vn/kinh-te/202505/loi-giai-cho-bai-toan-duoc-mua-mat-gia-cua-nong-san-viet-1043754/